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Discretionary Policy versus Non-Discretionary Policy in the Economic Adjustment Process

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  • Dinga, Emil

    ()
    (Center for Financial and Monetary Research “Victor Slăvescu”, Romanian Academy)

  • Ionescu, Cornel

    (Center for Financial and Monetary Research “Victor Slăvescu”, Romanian Academy)

  • Padurean, Elena

    (Center for Financial and Monetary Research “Victor Slăvescu”, Romanian Academy)

Abstract

The study aims to examine the concept of automatic fiscal stabilization in the context of macroeconomic adjustment policies. To this end, first a conceptual distinction between discretionary public adjustment policies and non-discretionary ones is achieved. Second, sufficient and necessary attributes for an automatic fiscal stabilizer are identified and examined, in order to obtain a definition of this instrument. The whole research approach is characterized by a logical and abstract way of thinking, to provide a general and non-contextual result. Finally, a general mechanism of action of automatic fiscal stabilizers is proposed, by introducing the basic concepts of action base and of action rate of such an instrument.

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Bibliographic Info

Article provided by Institute for Economic Forecasting in its journal Romanian Journal for Economic Forecasting.

Volume (Year): (2010)
Issue (Month): 4 (December)
Pages: 184-207

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Handle: RePEc:rjr:romjef:v::y:2010:i:4:p:184-207

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Related research

Keywords: sustainability; fiscal policy; automatic fiscal stabilizers; discretionary versus nondiscretionary; principle of the minimal action;

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References

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  1. Javier Andrés & Rafael Doménech, 2003. "Automatic stabilizers, fiscal rules and macroeconomic stability," Banco de Espa�a Working Papers 0314, Banco de Espa�a.
  2. Suescun, Rodrigo, 2007. "The size and effectiveness of automatic fiscal stabilizers in Latin America," Policy Research Working Paper Series 4244, The World Bank.
  3. Alan J. Auerbach & Daniel R. Feenberg, 2000. "The Significance of Federal Taxes as Automatic Stabilizers," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 37-56, Summer.
  4. Schabert, Andreas, 2005. "Discretionary policy, multiple equilibria, and monetary instruments," Working Paper Series 0533, European Central Bank.
  5. Hiebert, Paul & Pérez, Javier J. & Rostagno, Massimo, 2002. "Debt reduction and automatic stabilisation," Working Paper Series 0189, European Central Bank.
  6. Barrell, Ray & Pina, Alvaro M., 2004. "How important are automatic stabilisers in Europe? A stochastic simulation assessment," Economic Modelling, Elsevier, vol. 21(1), pages 1-35, January.
  7. Darrel Cohen & Glenn Follette, 2000. "The automatic fiscal stabilizers: quietly doing their thing," Economic Policy Review, Federal Reserve Bank of New York, issue Apr, pages 35-67.
  8. Alan J. Auerbach, 2002. "Is there a role for discretionary fiscal policy?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 109-150.
  9. Maria Antoinette Silgoner & Jesús Crespo-Cuaresma & Gerhard Reitschuler, 2003. "The Fiscal Smile," IMF Working Papers 03/182, International Monetary Fund.
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Cited by:
  1. Campeanu, Emilia Mioara, 2011. "The Stabilising Role Of The Fiscal And Budgetary Policies Within The Simplified Keynesian Model," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 15(2), pages 119-138.

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